Last time, I wrote about the critical importance of revenue growth in a newsletter titled, “It’s All About Growth.” Given some reader comments, I want to follow-up on three areas related to growth: working with alternative lenders, the balance between growth and risk management, and the importance of focus.

The bankers I know agree that their institutions have narrowed the “credit box” in which they operate. Loan requests frequently fail to fit within a bank’s lending parameters. The loan request may be too small, from an undesired industry, or from a company with a troubled past. In some cases bankers may refer that potential borrower to a specialized lender on an informal basis; in other cases, they simply say no. The bank receives no revenue for the deal not done and could jeopardize any relationship that currently exists, perhaps on the deposit side.

In the pursuit of revenue growth and serving current and prospective customers, banks need to become better at developing referral relationships to non-bank lenders. More of these players are springing up in light of borrower needs and investors who see a growing opportunity because of bank reluctance to lend either due to internal concerns or regulatory constraints. For example, merchant advance companies, like CAN Capital, provide loans based upon a company’s projected credit/or debit card sales, often with some portion of the advance repaid on a daily basis. Working with an alternative lender allows a bank to say “yes” and acquire new non-credit customers without taking on unacceptable risk. Of course, it can also generate referral revenues for the bank.

Banks need to go beyond the traditional product set if they are to meet prospect needs and remain relevant. Whether related to merchant advance, equipment finance, or other areas, quality partners exist who are experienced in working with banks and can enhance, rather than threaten, the customer relationship.

However, one issue with growth in general and working with third parties in particular requires banks to ensure that risk management and compliance requirements are tightly adhered to. While I believe it is “all about growth” for banks wishing to survive, nonetheless, that growth has to be in the context of meeting seemingly ever-increasing hurdles. For example, one banker recently told me that regulators now want to know how a loan scheduled for payment in, let’s say ten years, actually gets paid off in, let’s say, five. Rather than a cause for celebration, regulators are concerned that money laundering or some terrorist activity could be involved in the loan’s repayment. Banks and their stakeholders have to pay for this needle in a haystack hunt.

Rules related to working with third parties need to be reviewed carefully, and banks will only want to work with vendors that can demonstrate their attention to compliance. The best vendors are well aware of regulatory requirements (they have to be) and usually provide banks with a turnkey solution to the financing opportunity.

As for focus, a comment attributed to Winston Churchill very much applies to banking today. At the end of a meal, when Churchill was presented with a dessert, he took a taste, pushed it away and commented, “This pudding has no theme.” Today, many banks have no themes, continuing to try to be too many things to too many people in the misplaced hope that such an approach serves as a strategy. Great banks have a theme that oftentimes differs significantly from one another. Look at the themes of companies like US Bancorp, Signature, City National of Beverly Hills; on the community banking side consider 1st Source and among non bank players assess CAN and Lending Club. They know what they are and, as important, are not.

Focus entails some sort of specialization whether involving a customer segment (City National and CAN pursue very different customer sets) and/or a product emphasis (Signature with deposits and 1st Source with commercial finance) and/or a channel (Lending Club with its P2P focus). Virtually all the equipment finance companies we assessed for our recent ELFF report (Rise of the Banks) succeed in large part because of focus.

Banks operate without focus for multiple reasons: over time businesses have been allowed to sprout up without an overriding strategic umbrella, oftentimes as a result of opportunistic events or an individual’s initiative; some executives think that casting as wide a net as possible results in more wins (the opposite is usually true); management lacks the strength to set a strategic direction and KEEP TO IT. (Caps are intentional.)

I return with certainty to what I wrote about last time. It is all about growth. Not stupid growth that cannot be sustained or that results in regulatory trouble. Not a growth path that, rather than emphasizing consistency, resembles the old circus act in which a performer desperately tries to keep multiple plates spinning before they crash to the ground.

2014 will likely be a year in which performance pressures only grow and one in which regulators find even more areas of banking to object to. Bank management needs to be more disciplined than ever just to remain in place.